Steel & Tube's record $1.9m fine for misleading over steel mesh

Wednesday, 24 October 2018

Commerce Commission chairman Mark Barry said Steel & Tube's senior management were at fault as they failed to put in place adequate procedures and oversight.

Steel & Tube has been fined a record $1.885 million for false claims about its earthquake-grade steel mesh.

The record fine was handed down to the company on Wednesday for breaching the Fair Trading Act, by making false and misleading representations about its steel mesh products used in construction to provide strength and stability in the event of an earthquake.

The Commerce Commission laid the charges against Steel & Tube in 2016.

This is the highest fine to date under the Fair Trading Act for a single company, the Commerce Commission said.

In the judgement released in the Auckland District Court on Wednesday, Judge Warren Cathcart sentenced Steel & Tube after the listed company pleaded guilty to 24 charges under the Fair Trading Act.

* First sentence handed down in watchdog's investigation into steel mesh

* Commission lays charges over steel mesh claims**

The charges relate to conduct between March 1, 2012 and April 5, 2016. They cover 482 batches and about 480,000 sheets of steel mesh, which Steel & Tube sold for about $24m.

The offending fell into two categories:

- Representations that were liable to mislead the public on batch tags, batch test certificates, advertising collateral and Steel & Tube's website that its SE62 steel mesh was 500E grade steel mesh meeting the Australia/New Zealand Standard for reinforcing steel, when it was not. Steel & Tube failed to properly age and test the product.

Former Steel &Tube boss Dave Taylor resigned last year.

- False and misleading representations on batch test certificates and Steel & Tube's website claiming the steel mesh had been independently tested when it had not.

Steel & Tube made misleading representations about the grade of its steel mesh.

Cathcart characterised the culpability of Steel & Tube as 'grossly negligent'.

'Senior management ought to have known of the large scale non-compliance over the four-year charging period,' he said.

'The technical manager was not properly supervised. Steel & Tube cannot be permitted to wash their hands of taking responsibility for that negligent oversight … it was Steel & Tube's responsibility to have proper systems in place to ensure compliance with the standard.

'The lack of robust procedures would have been self-evident even if basic enquiries had been made.'

Lawyer, Adina Thorn who is fighting a class action against the non-compliant steel suppliers expects more people to join her suit.

Non-compliance with the standard does not necessarily mean the product lacks the physical and mechanical properties of earthquake grade steel mesh.

'Questions about the soundness of the mesh remain largely unanswerable which was precisely the mischief the standard seeks to address. And the whole purpose of the standard is to safeguard people from injury caused by structural failure; to safeguard people from loss of amenity caused by structural behaviour; and to protect other property from physical damage,' Cathcart said.

Commission chairman Dr Mark Berry said Steel & Tube's representations arose because senior management of a large company failed to put in place adequate procedures and oversight.

'The penalty imposed today demonstrates that this is unacceptable and high-risk conduct that undermines the confidence of the public in construction products being sold into the market.'

'Consumers have no choice but to trust and rely on representations about standard compliance. That's why standards exist. These types of misrepresentations strike at the very heart of the Fair Trading Act by not only undermining confidence in standards but also in the wider construction industry,' Berry said.

Lawyer Adina Thorn, who is backing a class action against the company and other non-compliant steel mesh suppliers, welcomed the court's decision.

'The proposed action is funded … claimants will face no out-of-pocket costs, as all the legal, technical and court costs involved in a claim of this scale will be picked up by the funder in return for them receiving a share of any proceeds of success,' Thorn said.

The prosecution was one of a series of actions brought by the commission against steel mesh suppliers that stemmed from concerns raised in 2015.

Timber King and NZ Steel Distributor were fined $400,950 earlier this year for also making false and misleading representations about their steel mesh products used to strengthen buildings.

Fletcher Steel has previously been issued with a warning

The commission also filed 59 charges against Euro Corporation in December.